How to Choose the Right Broker

How to Choose the Right Broker – When it comes to investing, maybe there will be lots of terms that we often hear, one of which is broker. In general, the definition of a broker is an individual or an agency that mediates or represents an intermediary in trading securities in the capital market. The term broker is something that is quite close to the world of stocks. Not a few also call it the term broker. However, what exactly does the broker mean? What are the duties of a broker that are closely related to investments and stocks?

In this article, we will discuss in more detail the definition of a broker and its various types as well as how to choose the right and trusted broker.

Definition of Broker

The definition of a broker is a party that brings issuers together with investors to carry out buying and selling trades in the capital market. In English, brokers are also known as brokers. Where this broker can be said to be a broker in terms of investment. The individuals involved in this brokerage firm must have fairly high professional standards. They must have passed the Broker-Dealer Representative exam or WPPE and also have a CFA certificate or Certified Financial Analyst.

BAPPEBTI or the Commodity Futures Trading Supervisory Agency is a government-owned institution under the auspices of the Indonesian Ministry of Trade which has the task of supervising and also regulating futures trading in Indonesia. BAPPEBTI will supervise all activities that occur in the brokerage company. This government-owned supervisory agency has direct responsibility to the Minister of Trade or the Minister of Trade.

This supervision is carried out so that activities run in accordance with the provisions of the applicable law.

Meanwhile, the definition of a broker according to the OJK or the Financial Services Authority is an intermediary in trading who is appointed and also sworn in, in entering into an agreement, the intermediary acts for and on behalf of the security by receiving a provision. They do not have a regular working relationship with the broker or broker.

Broadly speaking, the definition of a broker is an individual or company that acts as an intermediary for buying and selling shares in the capital market or futures trading between issuers and investors.

Broker Duty

It can be said that the broker’s most important task is to assist investors in conducting transactions in the capital market. The broker’s main job is to act as a transaction intermediary, which will definitely help investors when they don’t have time to keep an eye on their assets all the time. A broker or company must carry out their duties in accordance with predetermined exchange ethics. The following are some of the broker’s duties, including:

1. Connecting Issuers with Investors

As financiers or fund owners, investors look for issuers to invest their money to develop the issuer’s company. The two parties, be it investors or issuers, often have difficulty finding match points according to their respective needs. In this case, the broker’s job is to act as an intermediary for issuer companies and investors.

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2. Recommend the Best Investment Instruments

Apart from serving as a liaison between issuers and investors, another broker’s job is to recommend the best investment instruments to investors. In the investment world, brokers have adequate capacity and are responsible to investors. So, providing input and advice in making decisions for investors is one of the broker’s duties. If the broker provides the right recommendations, then the reputation of the broker will definitely be higher and known.

3. Accompanying Investors in the Transaction Process

The broker’s next task is to accompany investors during the transaction process in the capital market. Where the process usually contains a series of agreements and agreements between issuers and investors. Broker assistance in this transaction process avoids risks and can also run smoothly. In the process, the broker’s responsibility is to carry out all transaction orders instructed by investors, be it buying or selling. Not infrequently investors or clients often rely on the performance of brokers in analyzing the capital market because investors do not have much time.

Types of Brokers

Brokers are divided into several types. If based on the client, these types of brokers include:

1. Retail Brokers

Retail brokers are brokers who assist individual or individual investors in conducting transactions on the capital market. In simple terms, in this type, a broker is an individual whose job is to assist small investors in making business decisions and conducting an analysis. The income of this retail broker depends on the success of his analysis.

2. Institutional Brokers

This type of broker is more focused on the interests of large investors such as agencies, banks and institutions. This institutional broker will not assist individual investors in making an investment. One example of an institutional brokerage client is a mutual fund institution. Institutional broker commissions will usually be much less than retail brokers.

Then, according to the services provided by the brokerage firm, the types of brokers can be divided into:

1. Full Service Brokers

As the name implies, this type of broker will serve investors in full. That means, brokers will help investors, starting from providing information, analysis results, accompanying the transaction process, to maintaining accounts from investors. For novice investors or those who do not have expertise in analyzing the capital market, it would be very suitable to choose this type of full service. This broker commission is quite large compared to other types of brokers.

2. Deep Discount Brokers

Different from the previous types of brokers, this type of deep discount broker will not provide full service. Brokers are only tasked with instructing share buying and selling transactions and maintaining investor or consumer accounts.

3. Discount Brokers

These discount brokers will not process transactions with issuers, but they will only assist investors in making investment decisions. The duties of this type of broker include providing recommendations, information, results from analysis, providing advice, risks, investment strategies, and making decisions.

4. Internet or Online Brokers

This type of broker is a type of broker that is currently on the rise or is popular, because of its activities carried out online, namely online brokers. Basically, this online broker has services that are quite the same as other types. The difference is only in terms of the activities they carry out, namely utilizing the internet so that transactions become faster and are not limited by space.

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How to Choose the Right Broker

Before starting a partnership with a brokerage firm, there are several things that must be considered. Make sure to follow some of the tips below:

1. Check the Legitimacy of the Brokerage Company

The first thing to note is that we must first check the legitimacy or legality of the brokerage company. Apart from that, we can also ask for proof from them by showing the legal documents. If everything is safe, then we will avoid the threat of fraud because the company is supervised by capital market supervisors.

2. Choose those who have adequate and reliable capabilities

Brokers are important intermediaries for investors. Where a good brokerage company will certainly have a good reputation and also trusted branding. Because companies that have legality do not always have a good reputation among the wider community. This good reputation shows that the results of the analysis and recommendations are quite accurate.

3. Pay attention to Broker History with Previous Investors

Broker history is an indicator that can show its ability to help complete transactions to reap maximum profits. Not only that, we can also see whether the relationship with investors is well established. Don’t forget to pay attention to testimonials that have high potential in evaluating the company’s performance.

4. Adjust to Needs

Then the last thing is to make sure to choose a brokerage company that suits your needs. Because the broker itself consists of various types and services in the capital market. Not only that, make sure the commission that must be given is according to ability. This is intended so that it is not burdensome in the future. If at this time we have a business or business that is being run, then one of our investment goals might be to develop or expand the business in the future.

Legal Brokers in Indonesia

There are several conditions that must be met by a broker to be able to have official legality. In Indonesia alone, there are 96 brokers who have been officially registered on the IDX or the Indonesian Stock Exchange. Some of them are Indo Premier, Mandiri Sekuritas, Samuel Sekuritas Indonesia, Mirae Asset Sekuritas Indonesia, Morgan Stanley Sekuritas Indonesia, and MNC Sekuritas. Apart from that, there are still many other legal brokers that have been registered in Indonesia.

From the explanation above, we can understand that there are various types of brokers spread across Indonesia. Therefore, we must be able to adjust our choices to what we really need. If we are still trying to learn and are new to the investment world, then it would be better to choose a full service broker. And vice versa, if we have knowledge and experience that is long enough, then we can choose a deep discount broker to put more emphasis on spending.

This is an explanation of the definition of a broker and several types as well as tips for choosing the right broker. For Sinaumed’s who want to know more deeply about other ways of investing, they can read related books by visiting To support Sinaumed’s in adding insight, sinaumedia always provides quality and original books so that Sinaumed’s has #MoreWithReading information.